[OPE-L:6125] Re: Re: falling profits

From: Fred B. Moseley (fmoseley@mtholyoke.edu)
Date: Thu Nov 01 2001 - 00:58:17 EST

On Fri, 26 Oct 2001, Gerald_A_Levy wrote:

> Re Fred's [6091]:
> > In mainstream macroeconomics (in all its versions), profit is not even a
> > variable in the theory!  Similarly, in mainstream macro analyses of
> > recessions, profit is almost never mentioned, certainly not in academic
> > journals.  
> I guess it depends on how you define 'mainstream'.  
> Two arguably 'mainstream' schools which include a role for profits
> as a major variable are:
> 1) the Austrian strand of marginalism: didn't Bohm-Bawerk, Menger,
> von Mises, etc. all incorporate profit into their basic macro theory?

I don't know about von Mises, but Menger had no macro theory at
all.  Menger's theory is a micro theory of relative prices.  Profit is not
a variable in the theory.

Bohn Bawerk also had no macro theory.  He has a theory of "interest", but
it is part of a micro theory of distribution and it is entirely static.  

> 2) 'Supply-side' economic theory: isn't the level of corporate profits
> a crucial variable in that theory that leads to changes in the level of
> investment and then aggregate supply?

I have never seen a supply-side theory in which profit is a variable at
all, let alone a crucial variable.  Supply-side theory focuses on
individuals, not firms.  The central variable in supply-side theory is
personal income tax rates.  The argument in that a reduction of personal
tax rates would cause individuals to save more.  This increased saving
somehow gets channeled to firms, who then increase their investment.  I
don't see profit anywhere in this theory.  I agree with Patrick that no
one takes seriously the "madness of supply-side rhetoric."  

So I repeat:  Marx's emphasis on the rate of profit is unique in the
history of economics.


This archive was generated by hypermail 2b30 : Sun Dec 02 2001 - 00:00:05 EST